FACTORS AFFECTING EXTERNAL DEBT IN TRANSITION ECONOMIES: THE CASE OF CENTRAL ASIA AND THE CAUCASUS

Abstract

This study is to examine the key factors affecting external debts for the Central Asia and the Caucasus economies between the years 1995-2017 by using panel data analysis. Panel regression results show that public expenditures and the debt service have positive effect on external debt, while current account of the balance, inflation rate and domestic savings have a negative, and also significant effect on external debt. The results of this study show that foreign debt is being used as a significant source of financing for public expenditures, foreign debt repayments, and the current account deficit in the countries of Central Asia and the Caucasus.